Opting Out of WSIB: Key Considerations for Employers Facing Fiscal Uncertainty

Last September, the WSIB announced that its unfunded liability (at one point well in excess of $13B) had been eliminated and that the WSIB would be slashing premiums for employers by 30%.  This meant good news for many employers in the health, social and developmental services sectors where frozen budgets have not kept pace with the rising costs of WSIB, pay equity and other operational costs.

For many, however, 30% savings on what some would argue to be unjustifiably high premium rates is simply too little too late.  Indeed, by some reports the relative cost of WSIB alternative insurance may be as little as 1/12 of what WSIB premiums run.  Fortunately, employers who are not statutorily mandated to participate in WSIB (such as most agencies in the home care and community services sector and developmental services sector) have options.  Specifically, employers who participate in WSIB on a “By-Application” basis can “de-elect”, depart WSIB and take out WSIB alternative insurance.

Many By-Application employers have sought to de-elect in the past, but have historically been hit with sky-high “Departure Premiums”.  Departure Premiums were unilaterally imposed by the WSIB in the late 1990’s (without notice to employers) to address mounting unfunded liability associated with the unfunded costs of existing claims by injured workers.  The Departure Premium for any employer seeking to de-elect was calculated based on the employer’s proportionate share of the unfunded liability – regardless of the number of existing claims the employer had or their actual cost to the WSIB.

By 2015 the WSIB’s unfunded liability had risen to more than $13 Billion and the associated departure premiums for de-electing employers were in the range of 2 to 3 times an employer’s annual WSIB premium costs.  Even more challenging was that an employer would be required to continue to pay WSIB premiums and would not be permitted to depart until the total departure premium had been paid – preventing an employer from departing WSIB and paying the departure premium out of the savings realized from de-electing.

This barrier to de-electing was eliminated when the WSIB’s unfunded liability was reportedly wiped out in September 2018.  The WSIB has confirmed that departure premiums will not apply for de-electing By-Application employers, sparking unprecedented interest in WSIB alternatives.

The following are some key consideration for agencies to keep in mind when contemplating de-election:

For All Employers:

  • Be aware of the benefits of WSIB – these include comprehensive (though some would say cumbersome and overly bureaucratic) case management and the rare (and valuable) protection from lawsuits and civil litigation related to workplace injuries that is unique to WSIB.
  • Consider the relative cost of alternative insurance (by some reports WSIB may be as much as 12 times the cost of alternatives), taking into account any continuing fees associated with existing claims. The WSIB indicates that continuing experience-based fees may apply for claims predating departure.
  • Consider the type of alternative insurance you obtain and note that most policies do not cover mental stress related injuries, which are covered by WSIB.  This can be a source of uncovered liability in litigation.

For Unionized Employers:

  • Review collective bargaining agreements (CBAs) for restrictions or specific requirements around WSIB – unions have been aggressively pursuing integration of WSIB at the bargaining table for years and as a result many agencies have WSIB built in to their CBAs.
  • Consider whether there could be an estoppel restricting your agency from opting out until after notice of the change is provided and the next round of bargaining has been concluded.
  • Even where there is nothing expressly addressing WSIB in your CBA, note that where the alternative insurance is not really equivalent (because for instance it does not cover stress related injuries) this will likely be a takeaway restricted by “maintenance of existing benefits” language in a CBA.
  • If an agency is in negotiations or has received a notice to bargain, the statutory freeze would prevent them from opting out until the parties are in a strike position or after the renewal of the agreement.

For Non-union employers:

As always, the complexities of change are much easier to navigate in the non-union environment.  At the same time, non-union employers should keep in mind that making the dramatic move of de-electing may jeopardize their non-union status if a union organizer attempts to use WSIB departure to prompt a certification campaign.  Clear communications and open feedback processes that address employees’ concerns will help to ease this transition and reduce the risk of a union organizer hijacking the conversation.

In these times of fiscal uncertainty when the Boarder Public Sector is facing unprecedented pressures for efficiency, WSIB alternative insurance and de-election is one of a number of options in the belt-tightening toolbox that agencies may wish to consider.

Contact Cheryl Wiles Pooran at cwpooran@pooranlaw.ca or any other member of our labour team at PooranLaw to learn more about your options and obligations related to WSIB and the de-election process.